question archive When should a firm shut down to minimize its losses (The "Shut-down" Rule)?
When should a firm shut down to minimize its losses (The "Shut-down" Rule)?
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When should a firm shut down to minimize its losses (The "Shut-down" Rule)?
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When the level of revenue earned by a firm is lower than the cost of production, then it will lead to losses to a firm. This is because the market price level is lower than previous level. When the firm is unable to cover its average variable cost and the marginal cost is greater than the average variable cost, the firm should shut-down the operations.
